888.10/1–1852: Telegram

No. 148
The Chargé in the United Kingdom (Penfield) to the Department of State1

top secret

3136. Although we have gravest misgivings in principle to extending financial assistance to an apparently irresponsible fanatic [Page 331] who has consistently jeopardized western interests, we nevertheless recognize dilemma which we are facing today in Iran and agree type of approach outlined Tehran’s excellent tel 2640 of Jan 15 is worth trying provided conditions outlined para 5, together with suggestions made below, are regarded as acceptable minimum. We wld go even further than para 4 reftel (“aid shld be accompanied by measures which at least give promise ending oil deadlock”) and recommend that granting of aid shld be made dependent upon simultaneous resumption flow of oil. We feel this is vital, because if Mosadeq shld get his hands on American money and then welsh on quid pro quo we wld be as vulnerable to continued extortion as any other victim of blackmail and in addition it wld be publicly clear that we were yielding to blackmail and subsidizing continued irresponsibility, with resultant disastrous effect on US and British prestige.

Against foregoing background, submit fol specific comments reftel:

As Tehran has recognized, this program will undoubtedly be difficult to sell to British, particularly since they wld have to concede points 3a and b, as well as reverse present refusal discuss compensation. National pride being consideration here as well as Iran, difficulty UK making concessions increases with every anti-British move made by Mosadeq. If Mosadeq, as he professes, wants settlement of oil problem with British, has certainly not in recent weeks followed tactics calculated to create desirable atmosphere. If we are to endeavor to sell this program to British, therefore, we must recognize that our difficulties are going to be greatly increased if we have to do it in atmosphere of continued pin pricking and browbeating by Mosadeq. Embassy Tehran shld be in best position suggest how this problem can best be handled with Mosadeq.
We do not think that program outlined para 5 reftel can be sold to British on basis 1952 alone and that wld be necessary revise b and e along lines para 7.
We do not understand ref to “company or companies” in para 5a and b. It is contemplated companies other than AIOC wld purchase oil at discount and, if so, what justification is offered AIOC or Iran for this procedure?

While we recognize problem posed by time element, we nevertheless consider it essential that any suggestions along these lines be discussed fully and frankly with British before any intimation given to Mosadeq in this connection, we wish point out that from recent conversations we have had with FonOff we gain no impression of any particular alarm re situation in Iran.… We therefore suggest we be authorized acquaint British with Tehran’s estimate [Page 332] of present financial situation, using in our discretion selected portions Tehran’s 2609, Jan 14, and 2633, Jan 15.2

  1. Repeated to Tehran.
  2. Regarding telegram 2609, see footnote 2, Document 145. Telegram 2633 is not printed. (888.10/1–1552) The Department responded to telegram 3136 from London on Jan. 19 instructing the Embassy not to initiate discussions in London on the topic of financial aid to Iran, as the subject was being actively considered in Washington with the British. (Telegram 3423; 888.10/1–1552)